Category: Australia & NZ

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ASX Market Leading Indicators

Bull-Bear Market Indicator
Stock Market Pricing Indicator

The gauge on the left indicates bull or bear market status, while the one on the right reflects stock market drawdown risk.

Bull/Bear Market

The ASX Bull-Bear Market indicator remains at 54%, after declining from 64% two weeks ago. Three of six indicators from Australia and China signal risk-off, with a combined weighting of 60% in the ASX Bull-Bear Index, while the US Bull-Bear Index makes up the remaining 40%.

ASX Bull-Bear Market Indicator

NAB forward orders increased to zero in June, but the 3-month moving average remains negative at -1.67.

Australia: NAB Forward Orders

China’s OECD composite leading index eased to 100.26 for June, but remains well above our 99.0 risk-off level.

China: OECD Composite Leading Indicator

Stock Pricing

ASX stock pricing increased to a new high of 87.0 percent, from a low of 67.85 percent in April, now in the extreme range.

ASX Stock Market Value Indicator

We use z-scores to measure each indicator’s current position relative to its history, with the result expressed in standard deviations from the mean. We then calculate an average for the five readings and convert that to a percentile. The higher that stock market pricing is relative to its historical mean, the greater the risk of a sharp drawdown.

The PE of highest trailing earnings compares the current value for the All Ordinaries Index to the highest preceding four consecutive quarters of earnings for the index, removing distortions from sharp earnings falls during recessions. The current multiple of 17.5 is the highest since the Dotcom era.

All Ordinaries: PE of Highest Trailing Earnings

Conclusion

The ASX is now in a mild bear market, while the extreme valuation increases the risk of a significant drawdown.

Acknowledgments

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ASX Market Leading Indicators

Bull-Bear Market Indicator
Stock Market Pricing Indicator

The gauge on the left indicates bull or bear market status, while the one on the right reflects stock market drawdown risk.

Bull/Bear Market

The ASX Bull-Bear Market indicator declined to 54%, from 64% last week, slipping toward a bear market. Three of six indicators from Australia and China signal risk-off, with a combined weighting of 60% in the ASX Bull-Bear Index, while the US Bull-Bear Index makes up the remaining 40%.

ASX Bull-Bear Market Indicator

The three-month moving average of private dwelling approvals in Australia crossed below its 20-year MA signal line, switching to risk-off.

Australian Private Dwelling Approvals

Stock Pricing

ASX stock pricing increased to a new high of 86.58 percent, from a low of 67.85 percent twelve weeks ago. Stock pricing is now considered extreme.

ASX Stock Market Value Indicator

We use z-scores to measure each indicator’s current position relative to its history, with the result expressed in standard deviations from the mean. We then calculate an average for the five readings and convert that to a percentile. The higher that stock market pricing is relative to its historical mean, the greater the risk of a sharp drawdown.

Conclusion

The ASX is now in a mild bear market, while the extreme valuation increases the risk of a significant drawdown.

Acknowledgments

Posted on

ASX Market Leading Indicators

Bull-Bear Market Indicator
Stock Market Pricing Indicator

The gauge on the left indicates bull or bear market status, while the one on the right reflects stock market drawdown risk.

Bull/Bear Market

The ASX Bull-Bear Market indicator remains at 64%, reflecting a mild bull market. Four of six indicators from Australia and China signal risk-on, with a combined weighting of 60% in the ASX Bull-Bear Index. The US Bull-Bear Index makes up the remaining 40%.

ASX Bull-Bear Market Indicator

The ASX 200 Financials Index (XFJ) is consolidating in bull market territory, above support at 9250.

ASX 200 Financial Index

However, the ASX 200 (XJO) continues to decline against its gold benchmark in Australian Dollars.

Ratio of ASX 200 to Gold in AUD

Stock Pricing

ASX stock pricing eased slightly to 86.04 percent, from last week’s high of 86.23, and a low of 67.85 eleven weeks ago. Stock pricing remains extreme.

ASX Stock Market Value Indicator

We use z-scores to measure each indicator’s current position relative to its history, with the result expressed in standard deviations from the mean. We then calculate an average for the five readings and convert that to a percentile. The higher that stock market pricing is relative to its historical mean, the greater the risk of a sharp drawdown.

Conclusion

The ASX signals a mild bull market, but extreme valuations increase the risk of a significant drawdown.

Acknowledgments

Posted on

ASX Market Leading Indicators

Bull-Bear Market Indicator
Stock Market Pricing Indicator

The gauge on the left indicates bull or bear market status, while the right reflects stock market drawdown risk.

Bull/Bear Market

The ASX Bull-Bear Market indicator, at 64%, reflects a mild bull market. Four of six indicators from Australia and China signal risk-on, with a combined weighting of 60% in the ASX Bull-Bear Index. The US Bull-Bear Index makes up the remaining 40%.

ASX Bull-Bear Market Indicator

The ASX 200 continues to decline against its benchmark of Gold in Australian Dollars.

Ratio of ASX 200 to Gold in AUD

Stock Pricing

ASX stock pricing increased to 86.23 percent, from a low of 67.85 ten weeks ago, warning that stock pricing is extreme.

ASX Stock Market Value Indicator

We use z-scores to measure each indicator’s current position relative to its history, with the result expressed in standard deviations from the mean. We then calculate an average for the five readings and convert that to a percentile. The higher that stock market pricing is relative to its historical mean, the greater the risk of a sharp drawdown.

Conclusion

The ASX signals a mild bull market, but extreme valuations increase the risk of a significant drawdown.

Acknowledgments

Posted on

ASX Market Leading Indicators

Bull-Bear Market Indicator
Stock Market Pricing Indicator

The gauge on the left indicates bull or bear market status, while the right reflects stock market drawdown risk.

Bull/Bear Market

The ASX Bull-Bear Market indicator at 64% reflects a mild bull market.

Four out of six indicators from Australia and China (our largest trading partner) signal risk-on. These have a combined weighting of 60% in the ASX Bull-Bear Index. The US Bull-Bear Index, also unchanged, makes up the remaining 40%.

ASX Bull-Bear Market Indicator

The OECD composite leading indicator for China improved to 100.4 in May, well above the 99 warning level for a contraction.

OECD Composite Leading Indicator for China

However, NAB forward orders continue to warn of a contracting Australian economy in May, although the pace of the decline has slowed.

NAB Forward Orders

Australian private dwelling approvals are also weak. The 3-month moving average for April, at 15.2K, is close to its red signal line, at 15.1K, which signals risk-off.

Australian Private Dwelling Approvals

Stock Pricing

ASX stock pricing increased to 86.19 percent, exceeding the high of 85.83 in February 2025, from a low of 67.85 nine weeks ago. The reading warns that stock pricing is extreme.

ASX Stock Market Value Indicator

We use z-scores to measure each indicator’s current position relative to its history, with the result expressed in standard deviations from the mean. We then calculate an average for the five readings and convert that to a percentile. The higher that stock market pricing is relative to its historical mean, the greater the risk of a sharp drawdown.

Conclusion

The ASX signals a mild bull market, but valuations are now extreme, increasing the risk of a significant drawdown.

Acknowledgments

Posted on

ASX Market Leading Indicators

Bull-Bear Market Indicator
Stock Market Pricing Indicator

The gauge on the left indicates bull or bear market status, while the right reflects stock market drawdown risk.

Bull/Bear Market

The ASX Bull-Bear Market indicator increased from 54% to 64%, returning to a mild bull market.

Four of six indicators from Australia and China (our largest trading partner) now signal risk-on. These have a combined weighting of 60% in the ASX Bull-Bear Index. The US Bull-Bear Index, unchanged, makes up the remaining 40%.

ASX Bull-Bear Market Indicator

The ASX 200 Financials index ($XFJ) closed above 9260, signaling risk-on, and reversing the bear signal from March 7, 2025.

ASX 200 Financials

However, Australian private dwelling approvals remain weak. The 3-month moving average at 15.2K for April is close to its red signal line at 15.1K. A cross below would signal risk-off.

Australian Private Dwelling Approvals

Stock Pricing

ASX stock pricing jumped to 85.73 percent, from a low of 67.85 eight weeks ago, approaching the high of 85.83 from February 2025. The reading warns that stock pricing is in the extreme range.

ASX Stock Market Value Indicator

We use z-scores to measure each indicator’s current position relative to its history, with the result expressed in standard deviations from the mean. We then calculate an average for the five readings and convert that to a percentile. The higher that stock market pricing is relative to its historical mean, the greater the risk of a sharp drawdown.

 

A 20% trimmed mean of forward PE for the ASX 20 reached a new high of 22.57.ASX 20 Forward PE (20% Trimmed Mean)

Conclusion

The ASX signals a return to a mild bull market, but valuations are now extreme, increasing the risk of a significant drawdown.

Acknowledgments

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ASX Market Leading Indicators

Bull-Bear Market Indicator
Stock Market Pricing Indicator

The gauge on the left indicates bull or bear market status, while the right reflects stock market drawdown risk.

Bull/Bear Market

The ASX Bull-Bear Market indicator remains at 54%, signaling a mild bear market.

Three of the six indicators from Australia and China (our largest trading partner) signal risk-off. These have a combined weighting of 60% in the ASX Bull-Bear Index. The US Bull-Bear Index, also unchanged, makes up the remaining 40%.

ASX Bull-Bear Market Indicator

The ASX 200 Financials index ($XFJ) threatens to break out above 9260 on the weekly chart. A higher close would signal a new uptrend, reversing the bear signal from March 7, 2025.

ASX 200 Financials

Also, China’s NBS manufacturing PMI improved to 49.5 in May. A decrease below 49 would have triggered a recession signal.

China: NBS Manufacturing PMI

However, Australian private dwelling approvals are weakening. The 3-month moving average at 15.2K is close to reversing below its red signal line (15.1K), which would trigger a recession signal.

Australian Private Dwelling Approvals

Stock Pricing

ASX stock pricing increased to 80.75 percent, from a low of 67.85 seven weeks ago, approaching the high of 85.83 in February 2025. The reading above 80 percent signals that stock pricing is back in the extreme range.

ASX Stock Market Value Indicator

We use z-scores to measure each indicator’s current position relative to its history, with the result expressed in standard deviations from the mean. We then calculate an average for the five readings and convert that to a percentile. The higher that stock market pricing is relative to its historical mean, the greater the risk of a sharp drawdown.

Conclusion

The ASX signals a mild bear market, but the risk of a significant drawdown is now extreme.

Acknowledgments

Posted on

ASX Market Leading Indicators

Bull-Bear Market Indicator
Stock Market Pricing Indicator

The gauge on the left indicates bull or bear market status, while the right reflects stock market drawdown risk.

Bull/Bear Market

The ASX Bull-Bear Market indicator is unchanged at 54%, signaling a mild bear market.

Three of six indicators from Australia and China (our largest trading partner) signal risk-off. These have a combined weighting of 60% in the ASX Bull-Bear Index. The US Bull-Bear Index, also unchanged, makes up the remaining 40%.

ASX Bull-Bear Market Indicator

The ASX 200 Financials index ($XFJ) threatens to break out above 9320 on the weekly chart, which would signal a new uptrend. The indicator would switch to risk-on, reversing its bear signal from March 7, 2025.

ASX 200 Financials

However, China’s NBS manufacturing PMI fell sharply to 49.0 in April. Any further decrease would trigger a recession signal.

China: NBS Manufacturing PMI

Australian private dwelling approvals are also weakening. A reversal of the 3-month MA below the red signal line would also signal risk-off.

Australian Private Dwelling Approvals

Stock Pricing

ASX stock pricing eased slightly, to 79.65 percent, a sizable gain from 67.85 six weeks ago, but well below the high of 85.83 in February 2025.

ASX Stock Market Value Indicator

We use z-scores to measure each indicator’s current position relative to its history, with the result expressed in standard deviations from the mean. We then calculate an average for the five readings and convert that to a percentile. The higher that stock market pricing is relative to its historical mean, the greater the risk of a sharp drawdown.

Conclusion

The ASX signals a mild bear market, while the risk of a significant drawdown remains high.

Acknowledgments

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ASX Weekly Leading Indicators

Bull-Bear Market Indicator
Stock Market Pricing Indicator

The gauge on the left indicates bull or bear market status, while the right reflects stock market drawdown risk.

Bull/Bear Market

The ASX Bull-Bear Market indicator is unchanged at 54%, signaling a mild bear market.

Three of six indicators from Australia and China (our largest trading partner) signal risk-off. These have a combined weighting of 60% in the ASX Bull-Bear Index. The US Bull-Bear Index, also unchanged, makes up the remaining 40%.

ASX Bull-Bear Market Indicator

NAB forward orders remain below zero, signaling a contraction.

Australia: NAB Forward Orders

The OECD composite leading indicator for China improved to 101.03 in April, but this may have been affected by pre-ordering, which boosted exports ahead of the imposition of tariffs.

China: OECD Leading Composite Index

China’s NBS manufacturing PMI fell sharply to 49.0 in April. Any further decrease would trigger another recession signal.

China: NBS Manufacturing PMI

Stock Pricing

ASX stock pricing increased to 79.92 percent, a substantial gain from 67.85 five weeks ago, and approaching the high of 85.83 from February.

ASX Stock Market Value Indicator

We use z-scores to measure each indicator’s current position relative to its history, with the result expressed in standard deviations from the mean. We then calculate an average for the five readings and convert that to a percentile. The higher that stock market pricing is relative to its historical mean, the greater the risk of a sharp drawdown.

Conclusion

The ASX bull-bear indicator signals a mild bear market, while the risk of a significant drawdown remains high.

Australian private dwelling approvals are weakening, and China’s NBS manufacturing PMI is a hair’s breadth away from a recession warning; so the bull-bear indicator is on negative watch1.

Acknowledgments

Notes

  1. When a credit-rating agency places a company on negative watch, it indicates an increased likelihood of downgrading the rating in the near future.
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Australian Jobs versus Rate Cuts

The RBA is expected to cut interest rates by 50 basis points next week, with a further 25 basis points in June, according to the NAB economics team.

CPI declined to a low annual rate of 2.4% in the first quarter, well within the RBA’s target range. However, the rate jumped to 0.9% (3.6% annualized) in the latest quarter.

Australian CPI - Quarterly & Annual

While this gives the RBA some leeway, the labor market remains strong, warning of the dangers of cutting too early.

Unemployment is a healthy 4.1%.

Australia: Unemployment

Employment continues in a strong uptrend.

Australia: Employment

The wage price index reversed its recent decline, rising by 3.4% over the past 12 months, while the quarterly rate increased to 0.9% (3.6% annualized), signaling underlying inflationary pressure.

Australia: Wage Price Index

However, monthly hours worked dipped slightly, with the monthly trend falling by 0.1%, warning of a slowdown ahead.

Australia: Aggregate Monthly Hours Worked

Business confidence is also weak. NAN April business confidence remains below zero, while current business conditions are steadily declining.

NAB Business Confidence & Conditions

Cash flows are suffering, according to the NAB business survey, falling to their lowest level since 2020.

NAB Business Cashflow

Forward orders have been contracting since 2023.

NAB Business Forward Orders

The slowdown has affected the retail and wholesale industries the most, but mining and transport & utilities show the steepest monthly declines.

NAB Business Forward Orders by Industry

Declining capital expenditure warns of an economic contraction and slowing growth ahead.

NAB Business Capital Expenditure

Conclusion

The Australian economy is gradually slowing, but unemployment remains low, leaving the RBA with a difficult choice: cut rates in anticipation that unemployment will rise, or wait for the actual data? We would argue that they should hold firm while unemployment is low, but that seems to be a minority view.

Acknowledgments

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